Rent-A-Center Inc (NASDAQ: RCII) is up big early on in the market this morning after announcing that it has entered into a definitive agreement, under which the company will go private. Of course, the deal comes at a premium, exciting investors and sending the stock screaming for the top. Today, we’ll talk about:
- The going private transaction;
- what we’re seeing from RCII as a result; and
- what we’ll be watching for with regard to the stock ahead.
RCII Announces Going Private Transaction
As mentioned above, Rent-A-Center is having an incredibly strong start to the trading session this morning after announcing a going private transaction. In a press release issued early this morning, the company announced that it has entered into a definitive agreement, under which it will be acquired and taken private. The agreement was signed with Vintage Rodeo Parent, LLC, an affiliate of Vintage Capital Management. Under the terms of the agreement, Vintage will acquire all outstanding shares of RCII common stock at a price of $15 per share. In the release, the company said that the transaction is no subject to a financing condition and is expected to close by the end of 2018. All in all, the deal represents a takeover price of approximately $1.365 billion including net debt.
According to the merger agreement, shareholders of RCII will receive $15.00 in cash for each share of common stock owned. In the release, the company said that its Board of Directors has unanimously approved the transaction and recommends that shareholders vote in favor. Upon completion of the transaction, Rent-A-Center will become a privately held company. In a statement, Mitch Fadel, CEO at RCII, had the following to offer:
The Rent-A-Center Board, having just completed a comprehensive review of strategic and financial alternatives in consultation with outside legal and financial advisors, unanimously supports this transaction and is confident it maximizes value for stockholders while delivering a significant and immediate cash premium… Today’s exciting announcement reflects the significant progress we have made to materially improve our performance and would not have been possible without the hard work and focus of our talented co-workers over the last several months. Vintage is a natural partner for Rent-A-Center given its deep knowledge of the rent-to-own industry, and we look forward to partnering with them to realize the full benefits of the transaction.
The above statement was followed up by Brian R. Kahn, Managing Member and Founder of Vintage Capital as well as Chairman of The Board of Members of Buddy’s Newco, d/b/a Buddy’s Home Furnishings. Here’s what he had to offer:
We have long admired Rent-A-Center and are pleased to have reached this agreement to expand our rent-to-own portfolio… We believe that the combination of Rent-A-Center, Buddy’s and Vintage is a compelling opportunity to utilize our resources and expertise to enhance value and create a leader in the rent-to-own industry.
What We’re Seeing From The Stock
With the going private transaction in mind, Rent-A-Center investors are excited, pushing the stock toward the top. Of course, with such a strong premium offered, the gains only make sense. As is almost always the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (10:21), RCII is trading at $14.71 per share after a gain of $2.68 per share or 22.28% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on RCII. In particular, we’re interested in following the story surrounding the going private transaction. While the transaction has been unanimously approved by the Boards of both companies and is not subject to funding conditions, it is subject to both regulatory approval and shareholder approval as well as other customary closing conditions. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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